A break for lawyers who change firms

By Diane Karpman

Karpman

A unanimous Supreme Court recently issued a “common sense” decision written by Justice Kathryn Werdegar. It explains that once a lawyer leaves a law firm and takes the client with him or her, the firm can no longer be liable indefinitely, based on continuous representation, for the negligence of the departing lawyer who continues to represent the client. Even if the negligence occurred while the lawyer was at the firm, once the lawyer departs and continues to represent the client, the firm’s representation for the purposes of the statute of limitations terminates.

The statute of limitations for legal malpractice (CCP § 340.6) requires that a claim for a wrongful act or omission be commenced within one year after discovery, or four years from the date of the wrongful act, whichever occurs first. However, the statute is tolled in four situations, including where the lawyer continues to represent the client in the specific matter in which the alleged negligence occurred. (Even if a lawyer represents a client in several matters, the exception only applies to the specific matter in which the negligence occurred.) A lawyer could miss a beat. Mistakes happen.

Beal Bank v. Arter & Hadden (2007) 42 Cal. 4th 503, recognizes that lawyers no longer pledge lifetime fealty to their firms. This increase in legal mobility means that lawyers freely move about the marketplace, often taking clients with them. The continuous representation exception means just what it says. Once the lawyer leaves the firm, the firm no longer renders legal services to that client and has no ability to ameliorate harm. To toll the statute against the firm could create a daisy chain of liability reaching back to whatever law firm affiliation the lawyer had at the inception of the attorney-client relationship. This would create “indeterminate liability for firms every time an attorney leaves and takes a client with him or her.” (Id. at 512) Indeterminate liability drives up the cost of insurance, increasing legal fees, and thus becomes an access to justice issue.

If a lawyer is negligent while at a firm, the lawyer and the firm both have an opportunity to repair the problem. However, once the lawyer leaves, the firm cannot mitigate the damage to the client, because it no longer has a relationship with that client. “[A]ttorneys have a fiduciary obligation to disclose material facts to their clients, an obligation that includes disclosure of acts of malpractice. [cite omitted] Former counsel are powerless to control whether current counsel breach that obligation.” (Id. at 514)

Often when lawyers are moving on, arguments escalate about client/ file “ownership.” Beal Bank might suggest that if a lawyer is departing from a firm and the firm is worried, it may be prudent to ask the lawyer to take the questionable file with him.

Thanks to Otis Damslet for correcting my misuse of “craven” in last month’s column. I never intended to suggest that lawyers are cowardly. All you need to see are the media images of legions of Pakistani lawyers in their black suits to know that lawyers are courageous.

• Diane Karpman, a legal ethics expert, can be reached at 310-887-3900 or at karpethics@aol.com.